Q1 2024 CONMED Corp Earnings Call
Thank you for standing by and welcome to Cognex first quarter of fiscal year 'twenty 'twenty four earnings conference call. At this time all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session.
To ask a question during the session you will need to press star one on your telephone to remove yourself from the queue. You May press star one again.
Operator: Before the conference call begins, let me remind you that during this call, management will be making comments and statements regarding its financial outlook, its plans, and objectives. These statements represent forward-looking statements that involve risk and uncertainties, as those terms are defined under the federal securities law. Investors are cautioned that any such forward-looking statements are not guarantees of future events, performance, or results. The company's actual results may differ materially from its current expectations.
Before the conference call begins let me remind you that during this call management will be making comments and statements regarding its financial outlook. Its plans and objectives. These statements represent the forward looking statements that involve risk and uncertainties as those terms are defined under the federal securities laws.
There's are cautioned that any such forward looking statements are not guarantees of future events performance or results and the company's actual results may differ materially from its current expectations. Please refer to the risks and other uncertainties disclosed under the forward looking information in today's press release as well.
Operator: Please refer to the risk and other uncertainties disclosed in the forward-looking information in today's press release as well as the company's SEC filings for more details on the risks and uncertainties that may cause actual results to differ materially. The company disclaims any obligation to update any forward-looking statements that may be discussed during this call, except as may be required by applicable law. You will also hear management refer to non-GAAP or adjusted measurements during this discussion.
As the company's SEC filings for more details on the risks and uncertainties that may cause actual results to differ materially.
The company disclaims any obligation to update any forward looking statements that may be discussed during this call except as may be required by applicable law.
You will also hear management refer to non-GAAP or adjusted measurements. During this discussion while these figures are not a substitute for GAAP measures management uses these figures to aid in monitoring the company's ongoing financial performance from quarter to quarter and year to year on a regular basis and for a bench.
Operator: While these figures are not a substitute for GAAP measures, management uses these figures to aid in monitoring the company's ongoing financial performance from quarter to quarter and year to year on a regular basis and for benchmarking against other medical technology companies. Adjusted net income and adjusted earnings per share measure the income of the company, excluding credits or charges that are considered by the company to be special or outside its normal ongoing operation.
Martin against other medical technology companies adjusted net income and adjusted earnings per share measure the income of the company excluding credits or charges that are considered by the company to be special or outside its normal ongoing operations.
Operator: These adjusting items are specified in the Reconciliation Supporting the Company's Earnings Releases posted to the company's website. With these required announcements completed, I will turn the call over to Curt Hartman, Conmed's Chair of the Board, President, and Chief Executive Officer, for opening remarks. Mr. Hartman?
Adjusting items are specified in the reconciliation supporting the company's earnings releases posted to the company's website with these required announcements completed I will turn the call over to Curt Hartman <unk> chair of the board President and Chief Executive Officer for opening remarks, Mr. Hartman.
Curt R. Hartman: Thank you, Lateef. Good afternoon, and thank you for joining us for Conmed's first quarter 2024 earnings call. With me on the call is Todd Garner, Executive Vice President and Chief Financial Officer. We're also joined today by our new Chief Operating Officer, Pat Byer. Today, we will share with you our first quarter results and the overall outlook for our business. We will then open the call to your questions.
Curt R. Hartman: Thank you Latif and good afternoon, and thank you for joining us for <unk> first quarter 2024 earnings call.
Curt R. Hartman: With me on the call is Todd Garner Executive Vice President and Chief Financial Officer. We're also joined today by our New Chief operating Officer, Pat Beyer.
Curt R. Hartman: We will share with you our first quarter results and the overall outlook for our business. We will then open the call to your questions.
Curt R. Hartman: I'll start by reviewing our first quarter results. Total sales for the quarter were $312.3 million, representing a year-over-year increase of 5.7% as reported and 5.9% in constant current. I'm proud of these results on top of last year's inflated growth, which was driven by a tailwind from the final sales catch-up from the fourth quarter 2022 warehouse issue. Our global logistics team has never operated in such a coordinated and efficient a fashion as they are today, and I'm very proud of this team.
Todd W. Garner: I'll start by reviewing our first quarter results total sales for the quarter were $312 3 million, representing a year over year increase of five 7% as reported and five 9% in constant currency.
Todd W. Garner: Proud of these results on top of last year's inflated growth, which was driven by a tailwind from the final sales catch up from the fourth quarter 2022 warehouse issue. Our global logistics team has never operated and as coordinated and efficient fashion as they are today and I'm very proud of this team.
Curt R. Hartman: From an earnings perspective, during the first quarter, our gap net income totaled $19.7 million. This compares to net income of $1.8 million in the first quarter of 2023. Excluding special items that affected comparability, our adjusted net income of $24.8 million increased 20.3% year-over-year, and our adjusted diluted net earnings per share of $0.79 increased 19.7% year-over-year.
Todd W. Garner: From an earnings perspective during the first quarter, our GAAP net income totaled $19 7 million. This compares to net income of $1 8 million in the first quarter of 2023 exclude.
Excluding special items that affected comparability, our adjusted net income of $24 8 million increased 23% year over year and our adjusted diluted net earnings per share of <unk> 79 cents increased 19, 7% year over year.
Curt R. Hartman: Overall, I'm very encouraged by our start to the new year, as we saw strength across the domestic business and finished as expected outside the U.S. Given the year-over-year comparable sales, first quarter surgical volumes were steady, and capital spend in our categories remains consistent. Our new product launches, including the introduction of BioBrace into the foot and ankle space, while early, have us encouraged. We've made good progress on the supply chain challenges we were dealing with last year, and our backorder is now back to pre-pandemic levels relative to sales.
Speaker Change: Overall, I'm very encouraged by our start to the new year as we saw strength across the domestic business and finished as expected outside the U S. Given the year over year comparable sales first quarter surgical volumes were steady and capital spend in our categories remains consistent our new product launches, including the introduction of buyout.
Brace into the foot and ankle space, while early have US encouraged we've made good progress on the supply chain challenges, we were dealing with last year at our back orders now back to pre pandemic levels relative to sales.
Curt R. Hartman: Most importantly, we delivered solid results on both the top and the bottom line and are set up for continued strong 2024 performance. Before closing, I want to congratulate and welcome Pat Beyer as he has been promoted to the newly created role of Chief Operating Officer. I see this as a natural evolution for Conmed and our leadership team. Pat has great commercial and operational instincts and builds tremendous teams that deliver results. He was the first member of the current team that joined Conmed back in December of 2024.
Speaker Change: Most importantly, we delivered solid results on both the top and the bottom line and are set up for continued strong 2020 for performance.
Before closing I want to congratulate and welcome Pat buyer as he has been promoted to the newly created role of Chief operating Officer I see this as a natural evolution for <unk> and our leadership team Pat is great commercial and operational instincts and builds tremendous teams that deliver results. He was the first member of the current team that joined <unk> back in December of two.
Curt R. Hartman: He's well known across the company and, with over 30 years in the industry, is well known across our markets, both domestically and internationally. Finally, he has participated in various investor events during his time at Conmed, so he has exposure to this area of the business and many of you listening as well. Overall, I'm pleased with our start to the year, excited by the broad underlying strength of our diverse portfolio, and very encouraged by the positive engagement we are seeing across our business offering in all areas of the company. I'll now turn the call over to Todd, who will provide a more detailed analysis of our Q1 financial performance and take you through our full year guidance. Todd?
Speaker Change: 24, he's well known across the company and with over 30 years in the industry is well known across our markets both domestically and internationally.
Speaker Change: Finally, he has participated in various investor events. During his time at Con meds. So he has exposure to this area of the business and many of you listening as well overall.
Speaker Change: Overall, I'm pleased with our start to the year excited by the broad underlying strength of our diverse portfolio and very encouraged by the positive engagement, we are seeing across our business offering at all areas of the company now.
Speaker Change: I'll now turn the call over to Todd who will provide a more detailed analysis of our Q1 financial performance and take you through our full year guidance Todd.
Todd W. Garner: All sales growth numbers I referenced today will be given in constant current. The reconciliation to GAAP numbers is included in our press release. As usual, we have included an investor deck on our website that summarizes the results of the quarter and our updated guidance.
Todd W. Garner: Thank you Kurt.
Todd W. Garner: All sales growth numbers I reference today will be given in constant currency.
Todd W. Garner: The reconciliation to GAAP numbers is included in our press release as usual we have included an investor deck on our website that summarizes the results of the quarter and our updated guidance.
Todd W. Garner: For the first quarter of 2024, our total sales increased 5.9%. As a reminder, a year ago, we grew 19.4% organically in Q1 of 2023, as we had a tailwind from reducing the warehouse-related backlog. When we look at the first quarter over a two-year stacked growth rate, the average growth rate for the company is in the low double digits. Q1 of 2024 also had one less selling day compared to the prior year quarter, which we estimate to have impacted consolidated growth between 100 and 150 basis points.
Todd W. Garner: For the first quarter of 2024, our total sales increased five 9%.
Todd W. Garner: As a reminder, a year ago, we grew 19, 4% organically in Q1 of 2023, as we had a tailwind from reducing the warehouse related backlog.
Todd W. Garner: When we look at the first quarter over a two year stacked growth rate the average growth rate for the company is in the low double digits.
Q1 of 2024 has also had one less selling day compared to the prior year quarter, which we estimate to have impacted consolidated growth between 100 and 150 basis points.
Todd W. Garner: For Q1, our sales in the U.S. increased 7.2% versus the prior year quarter, and our international sales grew 4.2%. Worldwide orthopedics revenue grew 3.0% in the first quarter. In the U.S., orthopedic sales grew 10.6%, and internationally, orthopedic sales declined 1.6%.
Todd W. Garner: Yes.
Todd W. Garner: For Q1, our sales in the U S increased seven 2% versus the prior year quarter and our Internet International sales grew four 2%.
Todd W. Garner: Worldwide Orthopedics revenue grew 3.0% in the first quarter in.
Todd W. Garner: In the U S. Orthopedic sales grew 10, 6% and internationally orthopedic sales declined one 6%.
Todd W. Garner: Total worldwide general surgery revenue increased 8.2% in the quarter. U.S. general surgery revenue grew 5.7%, while worldwide general surgery revenue increased 14.1%. Now let's move to the expense side of the income equation. We will discuss expenses and profitability in the first quarter, excluding special items, as noted in our press release. Adjusted gross margin for the first quarter was 55.6%, an increase of 160 basis points compared to the prior year quarter. This was meaningfully better than expected due to product mix and specific geography.
Todd W. Garner: Total worldwide General surgery revenue increased eight 2% in the quarter U S. General surgery revenue grew five 7% while internationally general surgery revenue increased 14, 1%.
Speaker Change: Now, let's move to the expense side of the income statement.
Speaker Change: We will discuss expenses and profitability in the first quarter, excluding special items as noted in our press release.
Speaker Change: Adjusted gross margin for the first quarter was 55, 6% an increase of 160 basis points compared to the prior year quarter.
This was meaningfully better than expected due to product mix and specific geographies.
Todd W. Garner: Research and development expense for the first quarter was 4.4% of sales, 20 basis points higher than the prior year quarter. First quarter adjusted SG&A expenses were 38.7% of sales, 80 basis points higher than the prior year quarter. On an adjusted basis, interest expense was $8.2 million in the first quarter. The adjusted effective tax rate in Q1 was 23.8%.
Speaker Change: Research and development expense for the first quarter was four 4% of sales 20 basis points higher than the prior year quarter.
Speaker Change: First quarter adjusted SG&A expenses were 38, 7% of sales 80 basis points higher than the prior year quarter.
Speaker Change: On an adjusted basis interest expense was $8 $2 million in the first quarter.
Speaker Change: The adjusted effective tax rate in Q1 was 23, 8%.
Todd W. Garner: First quarter gap net income was $19.7 million. This compares to gap net income of $1.8 million in Q1 of 2023. Gap earnings per diluted share were $0.63 this quarter compared to $0.06 a year ago.
Speaker Change: First quarter GAAP net income was $19 $7 million. This compares to GAAP net income of $1 8 million in Q1 of 2023.
Speaker Change: GAAP earnings per diluted share were <unk> 63, this quarter compared to six a year ago.
Todd W. Garner: Excluding the impact of special items, in the first quarter, we reported adjusted net income of $24.8 million, an increase of 20.3% compared to the first quarter of 2023. Our Q1 adjusted diluted net earnings per share were 79 cents, an increase of 19.7% compared to the prior year quarter. Turning to the balance sheet, our cash balance at the end of the quarter was $33.9 million compared to $24.3 million as of December 31
Speaker Change: Excluding the impact of special items in the first quarter, we reported adjusted net income of $24 $8 million, an increase of 23% compared to the first quarter of 2023.
Speaker Change: Our Q1 adjusted diluted net earnings per share were <unk> 79.
Speaker Change: An increase of 19, 7% compared to the prior year quarter.
Speaker Change: Turning to the balance sheet, our cash balance at the end of the quarter was $33 9 million compared to $24 3 million as of December 31.
Todd W. Garner: The accounts receivable days as of March 31st were 70 days compared to 67 at the end of 2023 and 65 days a year ago. Inventory days at quarter end were 207 compared to 198 at December 31st and 215 a year ago. Long-term debt at the end of the quarter was $990.1 million versus $973.1 million as of December 31st.
Speaker Change: Accounts receivable days as of March 31 were 70 days compared to 67 at the end of 2023, and 65 days a year ago.
Speaker Change: Inventory days at quarter end were 207 compared to 198 at December 31, and 215 a year ago.
Speaker Change: Long term debt at the end of the quarter was $991 million versus $973 $1 million as of December 31.
Todd W. Garner: Our leverage ratio on March 31st was 4.0 times. As discussed on our last call, given the heavier cash requirements in the beginning of the year, we expect our leverage ratio to stay around four times in the first half of 2024 and then drop into the low threes by the end of 2024. Cash flow provided from operations in the quarter was $29.1 million compared to cash flow used for operations of $3.8 million in the first quarter of 2023. Capital expenditures in the first quarter were $2.0 million compared to $4.3 million a year ago.
Speaker Change: Our leverage ratio on March 31 was 4.0 times.
Speaker Change: As discussed on our last call given the heavier cash requirements at the beginning of the year, we expect our leverage ratio to stay around four times in the first half of 2024, and then drop into the low threes by the end of 2024.
Speaker Change: Cash flow provided from operations in the quarter was $29 1 million compared to cash flow used for operations of $3 $8 million in the first quarter of 2023.
Speaker Change: Capital expenditures in the first quarter were $2.0 million compared to $4 $3 million a year ago.
Speaker Change: Now, let's turn to financial guidance.
The first quarter came in a little better than we expected and we feel good about the expectations. We set in January for the first half and full year.
Todd W. Garner: Now let's turn to financial guidance. The first quarter came in a little better than we expected, and we feel good about the expectations we set in January for the first half and full year. Currency did get worse by about $10 million on the top line for the year. So our reported range for revenue drops by that $10 million and is now $1.33 billion to $1.355 billion. We expect the currency headwind in Q2 alone to be approximately 50 basis points.
Speaker Change: Currency did get worse by about $10 million on the topline for the year.
Speaker Change: So our reported range for revenue drops by that $10 million and is now 133 billion to 1.355 billion.
We expect a currency headwind in Q2 alone to be approximately 50 basis points.
Speaker Change: So we're now guiding to reported growth between 4% and 6% in Q2.
Speaker Change: The currency impact is affecting gross margin as well and we expect a portion of the mix favorability, we experienced in Q1 to potentially swing the other way in Q2.
Todd W. Garner: So we're now guiding to reported growth between 4% and 6% in Q2. The currency impact is affecting gross margin as well, and we expect a portion of the mixed favorability we experienced in Q1 to potentially swing the other way in Q2, resulting in gross margin improvement between 60 and 80 basis points in Q2. This would put the first half 2024 gross margin in the range of what we expected back in January.
Speaker Change: Resulting in gross margin improvement between 60, and 80 basis points over Q2 of 2023.
Speaker Change: This would put the first half 2020 for gross margins in the range of what we expected back in January.
Speaker Change: Given the currency impact and expected higher interest rates for the year compared to three months ago, we are lowering our adjusted EPS range for the year by five.
Todd W. Garner: Given the currency impact and expected higher interest rates for the year compared to three months ago, we are lowering our adjusted EPS range for the year by 5 cents to be between $4.25 and $4.35, which still represents growth between 23 and 26% over 2020. Overall, we are pleased with the Q1 performance, and excluding FX, we see the year unfolding the same way we did in January. And with that, we'd like to open the call to your questions, and I'll hand it back to Lateef. Thank you.
To be between $4 25.
Speaker Change: And $4 35.
Speaker Change: Which still represents growth between 23 and 26% over 2023.
Speaker Change: Overall, we are pleased with the Q1 performance and excluding FX, we see the year unfolding the same way we did in January.
Speaker Change: And with that we'd like to open the call to your questions and I'll hand, it back to Latif.
Latif: Thank you as a reminder to ask a question you will need to press star one one on your telephone to remove yourself from the queue. You May Press Star. One again, you will be limited to one question and one follow up please standby, while we compile the Q&A roster.
Speaker Change: Our first question.
Matthew Ian Mishan: Comes from the line of Matt O'brien of Piper Sandler Your question. Please.
Operator: Thank you. As a reminder, to ask a question, you will need to press star 11 on your telephone. To remove yourself from the queue, you may press star 11 again.
Matthew Ian Mishan: Thanks for taking the questions that I think we're going to ask you. So just.
Operator: You will be limited to one question and one follow-up. Please stand by while we compile the Q&A roster. Our first question comes from the line of Matt O'Brien of Piper Sandler. Your question, please, Matt.
Matthew Ian Mishan: Startups here.
Matthew Ian Mishan: Good to see general surgery come in above expectations, but.
Matthew Ian Mishan: Continual concern, it's just going to remain around this competitive threats.
Matthew Ian Mishan: So I'm just curious what you've seen from that competitor as far as their insufflator is it similar to what youre offering with <unk> Neil.
Matthew Ian Mishan: Thanks for taking the questions that I think we could ask too. So, just for starters here, you know, good to see general surgery come in above expectations, but the continual concern is just going to remain around this competitive threat. So I'm just curious, what you've seen from that competitor as far as their insufflator is concerned, is it similar to what you're offering with AirSeal? Or is it more similar to some of the other previous products that have been introduced to the market that claim to be low pressure, but they're really not? And then, you know, what is your expectation in terms of the potential for some impact there versus, you know, being more aggressive on the traditional app side? And then I do have one more question.
Matthew Ian Mishan: Is it more similar to some of the other previous products that have been introduced to the market that claim to be low pressure, but they're really not and then.
Matthew Ian Mishan: What is your expectation in terms of the potential for some impact there versus <unk>.
Matthew Ian Mishan: Being more aggressive on the traditional App side, and then I do have one more follow up thanks.
Speaker Change: Well that was a pretty healthy string of questions there Matt so.
It may.
Speaker Change: Not get to all of them. So please remind me if I do Miss some.
Speaker Change: I think where we are is it's early days.
Curt R. Hartman: Well, that was a pretty healthy string of questions there, Matt, so I may not get to all of them. So please remind me if I do miss some.
Speaker Change: To use a poker analogy of the cards have been dealt in con meds got the same hand, we've been planning since 2016, which is a clinical insufflator <unk> hand.
Curt R. Hartman: So I think where we are is in the early days, to use a poker analogy, the cards have been dealt, and Conmed's got the same hand we've been playing since 2016, which is a clinical insufflation hand where low pressure, consistency, precision pressure, all yielding significant studies showing length of reduction, length of stay, or reduction in length of stay, reduction in length of surgery, reduction in post-op pain, all of that is What we've said going back to Q2 of last year is that we believed it would be a standard insufflation device in the marketplace.
Speaker Change: Where low pressure consistency precision pressure.
Speaker Change: All yielding.
Speaker Change: Significant studies showing length of reduction length of stay a reduction in length of stay reduction in length of surgery reduction in post op pain all of that is still in our hands.
Speaker Change: What we've said going back to Q2 of last year is that we believed it would be a <unk>.
Speaker Change: Standard inflation device in the marketplace I think it's early I don't fully have all the reports on what what they're doing but I think we still feel very good about our position with our product in the marketplace.
Curt R. Hartman: I think it's early. I don't fully have all the reports on what they're doing, but I think we still feel very good about our position with our product in the marketplace. And as Todd said back in January, our guidance going into this year incorporated some level of potential headwind, and our view on that has not changed. Todd, I don't know if I missed anything. No, I think that's right.
Speaker Change: As Todd said back in January our guidance going into this year incorporate some level of potential headwind and our view on that has not changed.
Speaker Change: Todd I don't know if I missed anything so I think that's it.
Todd W. Garner: That's right.
Curt R. Hartman: There was one more piece to that long-winded question. It was really on the traditional lab side. Are you guys making more investments there just to get ahead of any potential pressure?
Todd W. Garner: There was one more piece to that long winded question. It was really on the traditional lab side are you guys, making more investments there just to get ahead of any potential pressure.
Todd W. Garner: I think that's a natural progression Matt.
Todd W. Garner: The business had zero revenue in that space and as at the end of last year, we had 40% of our <unk> revenue in that space in that.
Curt R. Hartman: You know, I think that's a natural progression, Matt. The business had zero revenue in that space, and at the end of last year, we had 40 percent of our air seal revenue in that space, and that is just a natural progression and evolution. We know how to do that. We've done it both internationally and in the domestic market, and we'll continue to do it there. It's really a byproduct of marketplace saturation. I'm not going to communicate if we're making more strategic investments in that area or not, but our sales force well understands that there's business out there for both general laparoscopic as well as robotic surgery, and we're going after both of them.
Todd W. Garner: That is just the natural progression and evolution.
Todd W. Garner: We know how to do that we've done it both internationally and in the domestic market and we will continue to go there, it's really a byproduct of markets place saturation and.
Todd W. Garner: I'm not going to communicate if we're making more strategic investments in that area or not but our sales force well understands that.
Todd W. Garner: There is business out there to get both in general laparoscopic as well as robotic surgery, and we're going after both of them.
Got it and then the follow up and sorry for taking up so much time here is just on the ortho side, specifically bio Rad is I know you said. Thank you said tens of millions of dollars. This year as it is.
Curt R. Hartman: Got it. And then the follow-up, and sorry for picking up so much time here, is just on the ortho side, specifically BioRes. I know you said, I think you said tens of millions of dollars this year. Is that it? Is it going to be more than a doubling of what you saw last year or even higher than that? How should we kind of frame up what BioRes could look like this year? Yeah, no, great, great question, Glenn.
Is it going to be more than a doubling of what you saw last year or even an even higher than that how should we kind of frame up what <unk> could look like this year. Thanks.
Speaker Change: Yes, great Great question glad you asked it.
Speaker Change: When we acquired <unk> in 2022, we said it would be about a $1 million in 'twenty two and it was right in that range and we said in 'twenty three it would get to mid single digits a year ago on this call I said high single digits and in fact, we exceeded that number last year and we said that as we got into 2024.
Curt R. Hartman: Yeah, no, great, great question. I'm glad you asked it.
Curt R. Hartman: When we acquired BioRes in 2022, we said it would be about a million dollars in 22, and it was right in that range. And we said in 23, it would get to mid-single digits. A year ago on this call, I said high single digits.
Speaker Change: It would be double digit millions and we feel very confident about that performance and when we made that statement back in 2022.
That was before we fully understood.
Speaker Change: How it would play out in our foot and ankle business and as I alluded to in my opening we are in the early stages of launching that as indicated at academy in the foot and ankle and we feel very good about the contributions foot and ankle and <unk> will make to the business as well so we feel great about <unk>.
Curt R. Hartman: And in fact, we exceeded that number last year, and we said that as we got into 2024, it would be double digit millions. And we feel very confident about that performance. And when we made that statement back in 2022, that was before we fully understood how it would play out in our foot and ankle business. And as I alluded to in my opening, we are in the early stages of launching that, as indicated at the Academy, into the foot and ankle.
Speaker Change: And feel great about its future not only in 2024, but well into the future.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of young Li of Jefferies.
Xuyang Li: Question. Please.
Curt R. Hartman: And we feel very good about the contributions foot and ankle and BioRes will make to the business as well. So we feel great about BioRes and feel great about its future, not only in 2024 but well into the future.
Xuyang Li: Alright, great. Thanks, so much for taking my question.
Speaker Change: Congrats on the promotion Pat.
Speaker Change: I guess.
Speaker Change: It was.
Speaker Change: Curious about that.
Speaker Change: <unk>.
Speaker Change: Further.
Speaker Change: Joe.
Operator: Thank you. Our next question comes from the line of Xuyang Li of CHEF. Your question, please, Xuyang.
Speaker Change: Currently relatively low penetration in the ASC.
Speaker Change: The channel.
Speaker Change: I guess I'm kind of curious about.
Speaker Change: Sort of the economics and reimbursement.
Speaker Change: Versus the.
Speaker Change: Hospital inpatient settings for procedures.
Xuyang Li: All right, great. Thanks so much for taking our questions. Congratulations on the promotion, Pat.
Speaker Change: Is it a tougher sell given.
Speaker Change: Given the premium priced versus conventional into theaters.
Curt R. Hartman: I guess to start, I was curious about just the air seal side of the service. You know, currently relatively low penetration in the ASC channel. I guess I'm kind of curious about sort of the economics and reimbursement in ASC versus hospital and patient settings for procedures. Is it a tougher sell into ASC given the premium price versus conventional insufflators?
Speaker Change: Young I think I missed the first part of your question I'm going to try to answer it if im a little off. Please please correct me here, but I think that the.
Speaker Change: The Genesis of the question is is it harder to sell <unk> into the surgery Center I think the short answer is there is not yet a substantial volume.
Speaker Change: Of laparoscopic or robotics procedures being done in the surgery Center.
Curt R. Hartman: Xuyang, I think I missed the first part of your question. I'm going to try to answer it. If I'm a little off, please correct me here.
Speaker Change: In general surgery overall.
Speaker Change: I don't think in any market, whether it's the hospital or the surgery center, we've run into pricing pressure because of the clinical differentiation and the substantial savings and value that facilities get from reduction in length of surgery reduction in length of stay.
Curt R. Hartman: But I think the genesis of the question is, is it harder to sell AirSeal into the surgery center? I think the short answer is that there's not yet a substantial volume of laparoscopic or robotic procedures being done in the surgery center and in general surgery overall. I don't think in any market, whether it's the hospital or the surgery center, we've run into pricing pressure because of clinical differentiation and the substantial savings in value that facilities get from reducing the length of surgery, reducing the length of stay, and reducing headaches for the clinical community in terms of post-op pain management.
Speaker Change: And reduced headaches for the clinical community in terms of post op pain management.
Speaker Change: In fact, you have many institutions that are taking it into their <unk> program.
Speaker Change: Which is the overall.
Speaker Change: Anesthesia and protocol care and looking at that.
Speaker Change: Inclusion of air seal to help with those programs so.
Curt R. Hartman: In fact, you have many institutions that are taking it into their ERAS program, which is the overall anesthesia and protocol care, and looking at that, and including AirSeal to help with those programs. So I think the ASC setting, as procedures move there, we'll be ready to go there. I just don't think that's a big portion of procedure volume at this point in time in the US market.
I think the ASC setting as procedures move there will be ready to go there I just don't think that's a big portion of procedure volume at this point in time in the U S market specifically.
Speaker Change: Okay, hopefully I got that question yes.
Speaker Change: Yes, Yes, you got it.
Speaker Change: Thanks for that.
Speaker Change: I guess.
Speaker Change: I follow.
Speaker Change: With kind of key areas.
Speaker Change: Ed.
Curt R. Hartman: Okay, hopefully, I got the question. Yeah, yeah, you got it at the bottom. Thanks for that. I guess, for my follow-up question, I was kind of curious as leverage drops to the low threes by the end of the year. Maybe you could talk a little bit about your thoughts on M&A. You know, when are you more comfortable doing some deals, the size of the deals, and what you might be interested in?
Leverage dropped to low threes by the end of the year.
Speaker Change: Maybe you can talk a little bit about that.
Speaker Change: On M&A when are you more comfortable doing some deals.
Speaker Change: The size of the deals.
Speaker Change: What you might be interested in.
Speaker Change: Yes, I would say.
Speaker Change: No change really in our approach or filters young.
I'll remind you of our filters and how we think through acquisitions.
Curt R. Hartman: Yeah, I would say, you know, no change really in our approach or filters, Xuyang. It's, you know, I'll remind you of our filters and how we think through acquisitions need to be accretive to the company's revenue growth, which is getting harder, right? As that revenue growth goes up, it's got to be accretive to that, and needs to be accretive to our gross margin profile. If not on day one, we have to have a clear line of sight for that to happen. I'd point you to Buffalo Filter, which came in, you know, when we acquired them; they were at the corporate average but quickly became accretive to the company's gross margins. So that's that's one of the filters.
Speaker Change: Needs to be accretive to the company's revenue growth, which is getting harder right because that revenue growth goes up it's got to be accretive to that.
Speaker Change: Needs to be accretive to our gross margin profile if not on day. One we have to have a clear line of sight for that to happen.
Speaker Change: I'd point, you to Buffalo filter, which came in when we acquired them. They were at the corporate average, but quickly became accretive to the Companys gross margin. So that's one of the filters.
Speaker Change: And then it's got to have some sort of protection to it right. We don't want to buy a big splash that then becomes an anchor so.
Speaker Change: We need to see some we'd like to buy platforms more than just products and and we want to see some protection through IP or some other knowhow that makes that.
Curt R. Hartman: And then, you know, it's got to have some sort of protection, right? We don't want to buy a big splash that then becomes an anchor. So we need to see some.
Speaker Change: Does.
That accretion that I've talked about being durable and then of course, the last one and sometimes the toughest one.
Curt R. Hartman: We like to buy platforms more than just products, and we want to see some protection through IP or some other know-how that makes that accretion that I've talked about durable. And then, of course, the last one, and sometimes the toughest one, is it's got to be at a value that benefits Conmed shareholders, right? We can't give all the value to the seller. That doesn't make any sense.
Speaker Change: It's got to be at a value that benefits con meds shareholders right. We can't give all the value to the seller that doesn't make any sense and so.
Speaker Change: That's the same approach we've been taking.
Speaker Change: Taking we've we've been pretty successful at that we continue to.
Speaker Change: Engage in the market and know what's out there.
Speaker Change: And that's our approach to M&A.
Speaker Change: Thank you.
Speaker Change: Our next question.
Curt R. Hartman: And so that's the same approach we've been taking. We've been pretty successful at that. We continue to engage in the market and know what's out there, and that's our approach to M&A.
Comes from the line of <unk> Chopra of Wells Fargo. Please go ahead Vic.
Vic: Hey, good afternoon, and thank you for taking the questions two for me as well, maybe I'll just start off with <unk>.
Operator: Our next question comes from the line of Vik Chopra of Wells Fargo. Please go ahead.
Vikramjeet Singh Chopra: Can you talk about what you saw in the quarter with respect to patient volume transport will compete and Jimmy and any color on April perhaps and then I had a follow up please.
Vikramjeet Singh Chopra: Hey, good afternoon, and thank you for taking the questions, two for me as well. So maybe I'll just start off with patient volume trends. Can you talk about what you saw during the quarter with respect to patient volume trends for orthopedics and general surgery and any color on April, perhaps, and then I had a follow-up.
Yes, I think as I tried to indicate in my opening comments.
Vikramjeet Singh Chopra: <unk> was pretty consistent.
Vikramjeet Singh Chopra: Availability of capital dollars consistent with what we had historically seen availability of procedure.
Curt R. Hartman: Yeah, I think, as I tried to indicate in my opening comments, the quarter was pretty consistent. Availability of capital dollars, consistent with what we had historically seen. Availability of procedure volumes, pretty consistent with what we had seen, whether it was orthopedics or general surgery, candidly. So the market specialties we serve were very consistent.
Vikramjeet Singh Chopra: Volumes pretty consistent with what we had seen.
Vikramjeet Singh Chopra: <unk>.
Vikramjeet Singh Chopra: And.
Vikramjeet Singh Chopra: Whether it was orthopedics are general surgery candidly so the market's specialties, we serve were very consistent.
Vikramjeet Singh Chopra: Theres always little pockets here and there I think there is.
Vikramjeet Singh Chopra: Surgical community strike in Korea, that's going on right now.
Vikramjeet Singh Chopra: That is delaying things, but those things tend to come.
Curt R. Hartman: You know, there's always little pockets here and there. I think there's a surgical community strike in Korea that's going on right now that is delaying things. But those things tend to come and go. And I'm probably not going to get into Q2 at this point in time, Vic, but I think we thought things were pretty consistent in Q1.
Vikramjeet Singh Chopra: Come and go.
Speaker Change: And I'm, probably not going to get into Q2 at this point in time Vic but.
Speaker Change: We thought things were pretty consistent in Q1.
Okay. Thank you and then for my follow up I think last quarter, you called out with near term challenges in your foot and ankle business.
Speaker Change: And Curt I think you said that you expect to get back and forth. Both Friday you get into the second quarter can you just provide an update on where you are with to put nickel business and the performance this quarter. Thank you.
Curt R. Hartman: Okay, thank you. And then for my follow-up, you know, I think last quarter you called out some near-term challenges in your foot and ankle business. And Curt, I think you said that you expect to get back to full stride as you get into the second quarter. Can you just provide an update on where you are with the foot and ankle business and your performance this quarter? Thank you. Sure, no, that's...
Speaker Change: Sure.
Curt R. Hartman: That's a great question and.
Speaker Change: Couple of things I'm going to go back in time, and then talk about current.
Speaker Change: Remember that was us.
Speaker Change: Smaller business with.
Speaker Change: The founder startup management team and we largely left it alone it's kind of a first do no harm philosophy, when we do acquisitions as we further integrated them in as time pass by.
Curt R. Hartman: Sure, no, that's a great question and a couple things where I'm going to go back in time, then talk about the current. Remember, that was a smaller business with the founder startup management team, and we largely left it alone. You know, it's kind of a first do no harm philosophy when we do acquisitions. As we further integrated them in as time passed by, the founder had told us he was going to retire, and that transition occurred in the second half of last year. That business reported into Pat. Pat went out, did a successful search, and brought in a new general manager in the third quarter of last year.
Speaker Change: The founder had told US he was he was going to retire and that transition occurred in the second half of last year.
Speaker Change: Business reported into Pat Pat went out did a successful.
Speaker Change: Search brought in a new general manager.
Speaker Change: Third quarter of last year that individual is getting up to speed was added academy with foot and ankle team.
Speaker Change: During AOS, Sean products meeting meeting customers has a background in the space anyway, which was important as well.
Speaker Change: In addition, we started doing more of the later stage of integration work, but the real drag on that business as we had run into some supply challenges with that business kind of our our orthopedics category in the second half of last year really hit some struggles.
Curt R. Hartman: That individual is getting up to speed, was out at Academy with the foot and ankle team during AOS showing products, meeting customers, and has a background in the space anyway, which was important as well. In addition, we started doing more of the later stage integration work, but the real drag on that business is that we had run into some supply challenges with that business; our orthopedics category in the second half of last year really hit some struggles.
Speaker Change: And we said as we came into 2024, we would be working through those in first quarter.
Speaker Change: But again it takes sales force and customer engagement.
Speaker Change: At a time to get back to where it was and so as we got into the second half of 2024, we thought.
Curt R. Hartman: And we said as we came into 2024, we would be working through those in the first quarter. But again, it takes Salesforce and customer engagement a little bit of time to get back to where it was. And so as we got into the second half of 2024, we thought our orthopedic platforms, be it foot and ankle, be it the legacy orthopedics, would be right back on track and at the growth rates that we expected.
Speaker Change: Orthopedics platforms be it foot and ankle be it the legacy orthopedics, we'd be right back on stride and at the growth rates that we expected and honestly, our Q1 growth rate domestically for orthopedics was was a positive step in the right direction and.
Speaker Change: We like the trends and we think we're on track with what we said in the January call.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Kristen Stewart.
Curt R. Hartman: And honestly, our Q1 growth rate domestically for orthopedics was a positive step in the right direction. We like the trends, and we think we're on track with what we said in the January call. Thank you. Our next question comes from the line of Kristen Stewart.
Kristen Marie Stewart: Your question please Christian.
Kristen Marie Stewart: Hi, Thanks for taking the question I just had a question on the international performance in the U S.
Kristen Marie Stewart: With predicts that came in a little bit below where I was expecting is that just kind of put a nickel impact or is there more there.
Operator: Our next question comes from the line of Kristen Stewart of C.L. King. Your question, please, Kristen. Hi, thanks for taking the question. I just had a question about international performance in the US or in North Peak.
Speaker Change: No I would say it's.
Speaker Change: Looking at the warehouse catch up that.
Speaker Change: Into Q1 of 2023, Kristen and a lot of orthopedics capital shipments in Q1 of 2023 that didn't.
Curt R. Hartman: No, I would say it's looking at the warehouse catch-up that moved into Q1 of 2023, Kristen, and a lot of orthopedics capital shipments in Q1 of 2023 that didn't, you know, it was just a lot of volume in Q1, and it really didn't have anything to do with foot and ankle at all. Okay, perfect.
Speaker Change: It was just a lot of volume in Q1, and it really didn't have anything to do with foot and ankle at all.
Speaker Change: Okay perfect.
And then Todd just on the gross margin I just wanted to make sure I understood. Your comments do you still expect gross margins to be up 100 to 150 basis points for the year has that changed.
Curt R. Hartman: Yeah, no change to the full year guide there, Kristen.
Todd W. Garner: Yes, no change to the full year guide there Kristen.
Operator: Thank you. Our next question comes from the line of Rick Wise of Stiefel. Please go ahead, Rick. We have you. Rick, please make sure your line is unmuted and if you know a speaker.
Todd W. Garner: Okay.
Speaker Change: Thank you our next question.
Speaker Change: Comes from the line of Rick Wise of Stifel. Please go ahead Rick.
Rick Wise: We have Eric.
Speaker Change: Rick Please make sure your line is muted.
Operator: Yeah. Oh, I didn't hear. I didn't hear my name said.
Rick Wise: Oh I didn't hear.
Rick Wise: Sorry about that. Sure. Thanks, guys. Good evening.
Rick Wise: I didn't hear my name sorry about that.
Rick Wise: Sure.
Todd W. Garner: I just want to make sure, Todd, that I'm understanding the guide carefully. I understand what you're saying about the second quarter and the currency, but it would seem like the implication is that we see a strong acceleration in the second half to get to your now new full-year guide midpoint. Maybe just at a high level, your confidence in the RAM, but maybe talk to us about some of the drivers of that acceleration and maybe just, you know, as always, there are moving pieces in the portfolio. What are you feeling particularly good about that maybe could drive you toward the upper end or better as we contemplate the rest of the year?
Speaker Change: Got it.
Speaker Change: Evening.
Speaker Change: I just want to make for.
Speaker Change: Im understanding.
Speaker Change: Carefully.
Speaker Change: The guide I understand what youre, saying, but the second quarter and the currency, but it would seem like that.
Speaker Change: The implication is that we see a strong acceleration.
Speaker Change: And second half.
Speaker Change: Get tier now new full year guide midpoint.
Speaker Change: Maybe just.
Speaker Change: At a high level your confidence in the ramp and maybe talk to us about some of the drivers.
Speaker Change: Of that acceleration and.
Speaker Change: And maybe just.
Speaker Change: As always the moving pieces in the portfolio.
Speaker Change: What are you feeling particularly good about.
Speaker Change: That maybe could drive you into 'twenty.
Speaker Change: Towards the upper end or better as we contemplate the rest of the year.
Todd W. Garner: Sure, Rick, thanks. Yeah, so really no change in how we see the year or first half versus second half versus three months ago. So we're pleased with Q1. It came in a little better than we thought. We still see the year playing out the way we laid it out last year. Obviously, the currency has gotten a little worse for everybody, and interest rates are obviously not projected to go down like they were three months ago.
Speaker Change: Sure. Thanks.
Speaker Change: Yes, so really no change in how we see the year or first half versus second half versus three months ago. So we're pleased with Q1 came in a little better than we thought.
Speaker Change: We still see the year playing out the way we laid it out last year, obviously currency has gotten a little worse for everybody and interest rates are obviously not projected to go down like they were three months ago. So those are really the only two changes to how we see the year. So.
Todd W. Garner: So those are really the only two changes to how we see the year. And as Curt talked about earlier, you know, the orthopedics business for the last couple of quarters, we've been talking about supply challenges. We think Q2 is the quarter where those teams kind of get their legs back under them, get back out engaging, and get back on offense. And really, the results of that show up in the back half of this year. So that's how we saw the year three months ago, and that's how we see the year today.
Speaker Change: And as Kurt talked about earlier, the orthopedics business for the last couple of quarters, we've been talking about supply challenges.
Speaker Change: We think Q2 is the is the quarter, where those teams kind of get their legs back under him get back out engaging get back on offense.
Speaker Change: And really.
Speaker Change: The results of that show up in the back half of this year. So that's how we saw the year three months ago and Thats, how we see the year today.
Curt R. Hartman: Rick, just on the product side, you know, I think, you know, I think, you know, I think the company has built a lot of diversity in its portfolio with a lot of new products. You were at Academy.
Speaker Change: Rick just.
Speaker Change: Rick just on the product side.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: The company has built a lot of diversity in its portfolio with a lot of new products. You were you were at Academy you saw some of the new products. We are showing there obviously, we remain incredibly excited by <unk>. So now with the expansion in our foot and ankle.
Curt R. Hartman: You saw some of the new products we were showing there. Obviously, we remain incredibly excited by BioBrace now with the expansion into foot and ankle. We've got the entirety of the foot and ankle portfolio. We're clear in the back order, and the team's getting back on offense. Our general surgery business, both internationally and in the U.S., remains very strong, and so it's not just one or two products. It's really the diversity of the portfolio and the market segments we call on.
Speaker Change: We've got the entirety of the foot and ankle portfolio were clear in the back order and the team is getting back on offense, our general surgery business, both internationally and in the U S remains very strong and so it's not one or two products, it's really the diversity of the portfolio and the market segments, we call.
Curt R. Hartman: I think sitting here today, we feel pretty good about our offering. So I think that's what gives us confidence in that second half. That's consistent with what we said in January, that the second half was going to be a big half.
Speaker Change: <unk> and <unk>.
Speaker Change: I think sitting here today, we feel pretty good about our offerings. So I think that's what that's what gives us confidence in that second half.
Speaker Change: That's consistent with what we said in January that the second half was going to be a big second half.
Todd W. Garner: Yeah, and I'll just remind you that those growth rates that we're talking about in the second half are not new growth rates for us, right? That's what we did in the quarters last year that didn't have abnormal comps. We were in that kind of low double-digit organic growth, right? So that's what this portfolio does, so that's not like a new level that we're trying to aspire to. We're working through a couple of quarters of challenges on the supply side, which we're getting behind us. But then it gets back to what this business has already shown that it can do.
Speaker Change: Yeah, and I'll, just remind you that that's that's really.
Speaker Change: Those growth rates that we're talking about in the second half are not new growth rates for US right. That's what we did in the quarters last year.
Speaker Change: Didn't have abnormal comps.
Speaker Change: We were in that kind of low double digit organic growth right. So that's that's what this portfolio does so that's not like a new level that we are trying to aspire to we're working through.
A couple of quarters of challenges on the supply side, right, which we're getting behind us.
Speaker Change: But.
Speaker Change: Then it gets back to what this business has already shown that it can do.
Rick Wise: Gotcha. I've got two more questions if I could.
Speaker Change: Okay.
Speaker Change: I wanted to.
Speaker Change: I've got two more questions if I could.
Curt R. Hartman: I want to come back to Airsteel, Curt. Maybe you could expand a little more on how your Airsteel U.S. commercial strategy has evolved in recent months. It strikes me, and this might be very naive of me to say it this way, but it strikes me that if you face some pressures in one market or with one customer group, you focus your team commercially a little more aggressively in some other segments or geographies. I don't know how you're thinking about it, but there's no doubt in my mind that Airsteel is a great product and that it doesn't own the whole market.
Speaker Change: I'm going to come back to Earth.
Speaker Change: Maybe you could expand a little more.
Speaker Change: On how your U S commercial strategy is evolving.
Speaker Change: Yes.
Speaker Change: Months.
Speaker Change: <unk> me and this might be very naive me to say it.
Strikes me that you faced.
Speaker Change: Pressures.
Speaker Change: One market.
Speaker Change: One customer group you focus.
Speaker Change: <unk> team commercially.
Speaker Change: Aggressively and some other segments or geographies I don't know, how youre thinking about it but.
Speaker Change: I mean, there's no doubt in my mind.
Speaker Change: It's a great product.
Speaker Change: Yes.
Speaker Change: And then it doesn't it.
Curt R. Hartman: There are opportunities. How are you thinking about other opportunities that maybe you do end up with a little more pressure on one side? Are there other areas to tackle that could help you limit or minimize or partially offset whatever pressures folks are worried about?
Speaker Change: It doesn't own the whole market there are opportunities.
Speaker Change: How are you thinking about other opportunities that maybe you do end up with a little more pressure.
Speaker Change: On one side are there other areas to tackle that could help you limited are minimized.
Speaker Change: Partially offset whatever pressures.
Speaker Change: They are worried about.
Curt R. Hartman: Yeah, Rick, listen, I'm not going to get into competitive strategies on a public call, but I think our teams are well versed in going to where the business opportunity is and taking advantage of that, especially when you have a clinically differentiated product that has been used in millions of patient lives with a plethora of studies around all things related to patient outcomes. We believe that that combination, when presented to the surgical community, independent of the specialty setting, is a game winner, and our view on that has not changed. And if it's a tougher sell in this market, we can either find new strategies to sell into that market, or we can go to where it's not as tough a sell. But let's be brutally honest.
Speaker Change: Yes, Richard listen I'm, not going to get into competitive strategies on a public call, but I think our teams are well versed on.
Speaker Change: Going to where the business opportunity is and taking advantage of that and especially when you have a.
Speaker Change: Clinically differentiated.
Speaker Change: Product that has been used over millions of patient lives with.
Speaker Change: <unk>.
Speaker Change: A plethora of studies around all things related to patient outcomes, we believe that that combination when presented to the surgical community.
Speaker Change: Independent of the specialty setting.
Speaker Change: As the game winter and our view on that has not changed.
Speaker Change: And if it's a tougher sell in this market.
Speaker Change: <unk>.
Speaker Change: You can either find new strategies to sell into that market or we can go to where it's not as tougher sell.
Curt R. Hartman: MedTech is a tough sell across the board because you have to convince people of clinical value and you have to work through value analysis committees. And we know how to do both of those with AirSeal because of what it brings to the table, as demonstrated, in the eight years that we've owned it and in the years before we owned it. And that body of evidence just grows daily. So we feel very good, independent of what may be in front of us, whatever path, that we're going to find success here with AirSeal.
Speaker Change: But let's be brutally honest med tech is a tough sell across the board because you have to convince people of clinical value.
Speaker Change: And you have to work through value analysis committees, and we know how to do both of those with <unk> because of what it brings to the table as demonstrated.
Speaker Change: In the eight years that we've owned it and in the years before we owned it.
Speaker Change: And that body of evidence just gross daily so we feel very good.
Speaker Change: Independent of what.
Speaker Change: May be in front of us whatever path.
Curt R. Hartman: Gotcha. And I apologize for asking three, if you don't mind. Just want to make sure we get smoke evacuation legislation. Two more states recently passed smoke evacuation legislation. I think you're up to 17 states now, both West Virginia and regular old Virginia. You got more and more states. We're further along post legislation passing. Are you aware of what you are seeing? Is this changing the dynamic and the outlook for the business?
But we're going to find success here with air sale.
Speaker Change: Gotcha and I apologize for asking three if you don't mind just want to make sure we get the smoke evacuation legislation to more states recently passed smoke evacuation legislation I think both west Virginia and Virginia.
Speaker Change: So I think you're up to 17 States now you got more and more states. We're further along post legislation passing.
Speaker Change: Right.
Speaker Change: What are you seeing is it changing the dynamic in the outlook for the business.
Curt R. Hartman: Any color would be great. Thank you so much.
Speaker Change: Any color would be great. Thank you so much.
Curt R. Hartman: I think it's interesting you would think at this point there'd actually be more legislation passing. It's been a little bit slow, and I I think, if my memory and reading the data are correct, I think Florida actually pulled the legislation, so they've actually taken a pause for a moment. I could be off on that, I'll have to double-check that, but that's what my memory says.
Speaker Change: No I think.
Speaker Change: It's interesting you would think at this point that would be actually more legislation passing.
A little bit slower.
Okay.
Speaker Change: Think if my memory and reading the data is correctly I think Florida actually pulled the legislation.
Speaker Change: So they have actually taken a pause.
Speaker Change: For a moment could be off on that I'll have to double check that but thats, what my memory says.
Curt R. Hartman: What we know from states that have passed legislation is that over time, as that legislation goes into effect... The growth rates in those markets are higher, and we think that's what will happen in West Virginia and Virginia, and we support the legislation. We support the operating room staff and nursing staff to have a safe and healthy environment. So our attitude here has not changed. We still believe we have a best-in-class product in the marketplace. We still believe we have a comprehensive portfolio that addresses all procedure types where smoke is created, and we still believe we have it in the hands of a great sales force around the world.
What we know is where states have passed legislation is that over time.
Speaker Change: As that legislation goes into effect the.
Speaker Change: The growth rates in those markets is higher and we think Thats, what will happen in West, Virginia, and Virginia and.
Speaker Change: We we support the legislation we support.
Speaker Change: The operating room staff nursing.
Speaker Change: Have a safe and healthy environment. So our offense here has not changed we still believe we have a best in class product in the marketplace. We still believe we have a comprehensive.
Speaker Change: Portfolio that addresses all procedure types, where smoke is created and we still believe we have it in the hands of a great sales force around the world.
Todd W. Garner: Yeah, and just to clarify on Florida, so there was a Florida bill in the process, that process ended on March 8th. So, that was kind of, Florida was in, had something in line to pass, but it didn't, it didn't pass, and they have, they're going to have to restart that bill.
Speaker Change: Yeah and just to.
Speaker Change: To clarify on Florida, So there was a Florida bill in process.
Speaker Change: That.
Speaker Change: That process ended on March eight.
Speaker Change: So.
Speaker Change: That was kind of Florida was in had something in line to pass, but it didn't it didn't pass and they have they're going to have to restart.
Speaker Change: That bill.
Operator: Our next question comes from the line of Robbie Marcus of J.P. Morgan. Please go ahead, Robbie.
Speaker Change: Thank you.
Our next question comes from the line of Robbie Marcus of Jpmorgan. Please go ahead Robby.
Robert Justin Marcus: Oh, great. Thanks for taking the question. Todd, just wanted to clear up some stuff on the guidance.
Robert Justin Marcus: Oh great.
Robert Justin Marcus: Thanks for taking the question.
Robert Justin Marcus: Todd just wanted to clear.
Todd W. Garner: You guys beat by $5 million on the top line, $0.05 on the bottom line, and there's a $10 million headwind for FX, and you're lowering by $0.05. So is there $5 million I'm missing, or is it really you're lowering by $0.10, but it's a $15 million headwind? And is it a $0.05 headwind for FX, or really a $0.10 set to get to the net? down five after.
Robert Justin Marcus: Some stuff on the guidance you guys beat by $5 million on the top line <unk> on the bottom line and Theres a 10 cent.
Robert Justin Marcus: Headwind or $10 million headwind for FX hit and Youre lowering by five said so.
Robert Justin Marcus: $5 million Im missing or is it really lowering by 10, but it's a $15 million headwind and is it a 5% headwind for FX. It really 10 set to get to the net down.
Todd W. Garner: Okay, thanks for the clarifying question, Robbie. So, uh, the reduction for the year is $10 million, which is entirely due to FX. So, no change to our full-year guide. You are correct that we beat consensus in Q1 by five million on the top and five cents on the bottom. What we're saying is that this relatively small beat does not change how we see the year on a constant currency basis. So there is no change to our full year guidance in constant currency.
Robert Justin Marcus: <unk> five after the beat in the first quarter.
Speaker Change: Okay. Thanks for the clarifying question Ravi.
Speaker Change: So.
Speaker Change: The reduction on the year is $10 million, which is entirely due to FX.
Speaker Change: So no change to our full year guide you are correct that we beat.
Speaker Change: Consensus in Q1 by $5 million on the top and five on the bottom what we're saying is that relatively small b does not change how we see the year on a constant currency basis. So no change to our full year guidance in constant currency.
Todd W. Garner: The only change is due to currency, which was that $10 million. So we still see the first half the way we saw it three months ago. Even though we beat Q1 by a little bit, we still see the first half the same. And we still see the second half the same as we did, the only adjustment being currency for the full year. And that goes for the top and bottom.
Speaker Change: The only change is due to currency, which was that $10 million. So.
Speaker Change: So we still see the first half the way we saw it three months ago, even though we beat Q1 by a little bit we still see the first half the same and.
Speaker Change: And we still see the second half of the same as we did the only adjustment being currency.
Speaker Change: For the full year.
Speaker Change: And that goes for the top and bottom.
Todd W. Garner: Okay, and then, uh, you know... Maybe just to help everybody get a level set on what your first half expectations were, you know, anywhere you want to help set the second quarter as we think about EPS or interest expense, which came in a bit lower. You reiterated gross margin, which I believe FX gets offset in sales, correct, right? So that wouldn't change any of the FX guidance.
Speaker Change: Okay and then.
Speaker Change: Maybe just.
Speaker Change: Help everybody get level set on.
Speaker Change: What your first half expectations were anywhere you want to help set second quarter as we think about EPS are interest expense, which came in a bit lower.
Speaker Change: And you reiterated gross margin, which.
Speaker Change: I believe FX gets offset in sales correct right. So that wouldn't change any of the opex guidance.
Todd W. Garner: Now, we definitely see effects affecting gross margin as well. So yeah, that's why I did provide a little more detail on Q2 in my scripted comments. So we see... Q2 as a 4 to 6% reported growth, so that would mean, and I said there's 50 basis points of currency headwind there, so that would be 4.5 to 6.5 constant currency growth for Q2, but 4 to 6% reported for Q2. I did not give specific EPS guidance for Q2, but I did give that back in Q1, we kind of talked about that, and I think the street has that in the general area. So if you take the commensurate impact on the bottom line to get to those revenue numbers, I think we should be in the right place.
Speaker Change: No, we definitely see FX affecting gross margin as well so yes.
Speaker Change: So that's why I did provide the little more detail on the Q2 in my scripted comments so we see.
Speaker Change: In Q2, as a 4% to 6% reported growth so that would mean and I said, there's 50 basis points of currency headwind there so that would be <unk>.
Speaker Change: Four five to six and a half constant currency growth for Q2, but 4% to 6% reported for Q2 I did not give specific EPS guidance for Q2.
Douglas Goldstein: Douglas Goldstein, CFP®, is the director of Profile Investment Services and the host of the Goldstein on Gelt radio show. His book Building Wealth in Israel is available in bookstores, on the web, or can be ordered at www.profile-investment.com. He is a licensed financial professional both in the U.S. and Israel. Securities offered through Portfolio Resources Group, Inc., Member FINRA, SIPC, MSRB, NFA, SIFMA. Accounts carried by National Financial Services LLC, Member NYSE & SIPC, a Fidelity Investments company. Member NYSE & SIPC, a Fidelity Investments company. His book Building Wealth in Israel is available in bookstores, on the web, or can be ordered.
Speaker Change: But I did give that back in Q1, we kind of talked about that and I think I think the street has that in the general.
Speaker Change: Area. So if you take the commensurate.
Speaker Change: Impact on the bottom line to get to those revenue numbers I think we should be in the right place.
Speaker Change: Great I appreciate it thank you very much.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Our next question.
Speaker Change: Comes from the line of Travis Steed.
Travis Lee Steed: Bofa Securities Your question please Travis.
Travis Lee Steed: Hey, Thanks for taking my question.
Travis Lee Steed: Maybe I don't know a follow up on Q2, I think I heard adjusting for currency.
Todd W. Garner: Great, I appreciate it. Thank you very much.
Operator: comes from the line of Travis Steed, B of A security. Your question, please, Travis. Hey, thanks.
Travis Lee Steed: Four five to six 5% constant currency growth.
Travis Lee Steed: Just want to understand the cadence for, I assume supply gets better in Q2? Anything to consider, like why we wouldn't see a step up in growth rate in Q2? And then I'll ask my second question. That's just on the Interbones and BioRes. Do you still assume that business is double-digit growth in 2024? Yes.
Travis Lee Steed: And in Q1.
Travis Lee Steed: I understand the cadence for I assume supply gets better in Q2.
Travis Lee Steed: Anything to kind of consider really why we wouldn't see a step up in growth rate in Q2, and then I'll ask my second question just on the antibody as a buyer of I assume you still assume that business as a double digit growth in 2024.
Todd W. Garner: Yes. So, yes, I'll take the second one first because I remember that better.
Travis Lee Steed: Yes.
Speaker Change: So yes, so I'll take the second one first because I remembering that better.
Todd W. Garner: Yes, we still think we'll see those growing double digits for the year. Okay, so Q2Y four and a half to six and a half. We just did 5.9.
Speaker Change: So we still think we still see those growing double digits for the year.
Speaker Change: Okay. So Q2 why for five to six and a half we just did five nine.
Todd W. Garner: You know, those that are all kind of in the same range as I see it. So I see those as pretty consistent. You are correct that the supply issue should be less as we move forward. But that's, you know, as we look at... The normal seasonality that happens between Q1 and Q2 sequentially, I think our Q2 guidance is reasonable based on what that normal sequential seasonality is. Now when you start comparing that against prior years, it gets a little noisy, right?
That's all kind of in the same ranges as I see it so I see those as pretty consistent you are correct that supply the supply issue should.
Speaker Change: Be less as we move forward.
Speaker Change: But as we look at.
Speaker Change: The normal seasonality that happens.
Speaker Change: Between Q1, and Q2 sequentially I think I think our Q2 guidance is reasonable based on what that normal sequential seasonality is now when you start comparing that against the prior years.
Todd W. Garner: Because not every quarter is normal, and there's been, if you go back a couple years, you've got COVID affecting how those played out sequentially. But as we looked at a pre-pandemic world, and what would our business normally do between Q1 to Q2 sequentially? We think that where our guide is is the right place.
Speaker Change: It gets a little noisy right because not every quarter is normal and there has been.
Speaker Change: There has been if you go back a couple of years you've got Covid.
Speaker Change: <unk>, how those played out sequentially, but as we looked at a pre pandemic world.
Speaker Change: And what would our business normally does between Q1 to Q2 sequentially.
Speaker Change: We think that where our guide is is the right place to be for now.
Operator: The next question comes from the line of Mike Matson of Needham. Please go ahead, Mike.
Speaker Change: Thank you.
Speaker Change: Our next question.
Speaker Change: Comes from the line of Mike Matson of Needham. Please go ahead Mike.
Michael Stephen Matson: Yeah, thanks. Thanks.
Todd W. Garner: I just really have one question, and I want to kind of follow up on Robbie's question about the change in the guidance. So, look, I understand you don't give quarterly guidance, but you did beat where consensus was in the first quarter by about 5 million, and then you're lowering it for the year by 10 million. So, I think that the, you know, I guess, pessimistic view here is that you're taking down guidance for the remainder of the year by like 5 million.
Michael Stephen Matson: Yes. Thanks.
Michael Stephen Matson: I just really have one question I wanted to follow up on Robbie's question about <unk>.
Michael Stephen Matson: The teams in the guidance. So look I understand you don't give quarterly guidance, but you did.
Michael Stephen Matson: <unk>.
Michael Stephen Matson: Where consensus was in the first quarter by about $5 million and then you are lowering.
Michael Stephen Matson: For the year by $10 million, so I think that the.
Michael Stephen Matson: I guess pessimistic view here.
Michael Stephen Matson: <unk> down guidance for the remainder of the year by about $5 million I know, it's not a big number but in an environment where people are high.
Todd W. Garner: I know it's not a big number, but in an environment where people are hyper-focused on any potential impact from intuitive, it seems like a, you know, it kind of sends a bad sign, I guess, so I just want to know, why not just take it down by the 5 million net impact, you know, netting out the currency versus the 5 million from the first quarter, 5 million upside from the first quarter.
Michael Stephen Matson: Hyper focused on any potential impact from intuit.
Michael Stephen Matson: It seems like.
Michael Stephen Matson: It kind of sends a bad sign I guess, so I just want to know.
Michael Stephen Matson: Why not just take it down by the $5 million.
Michael Stephen Matson: Net impact netting out the currency versus the $5 million from the first quarter 5 million upside from the first quarter.
Michael Stephen Matson: Mike, we take our job seriously. We give you advice based on our latest information. And there is no change to how we see the year. You are right. We had a small beat in Q1. But we don't think that is big enough to alter our view of the year. We still see the year the same way we did three months ago, and we've given the guidance we've given today because we think it's appropriate.
Speaker Change: Mike we take our job seriously we gave you guidance.
Speaker Change: Based on our latest information.
Speaker Change: And there is no change to how we see the year you are right.
Speaker Change: We had a small beat in Q1, we don't think that is big enough to alter our view of the year, we still see the year. The same way we did three months ago.
Speaker Change: And we've given the guidance, we've given today and we think it's appropriate.
Todd W. Garner: Okay, I understand, but I guess the 5 million effective reduction for the rest of the year. What's causing that, I guess? Maybe let me put it another way, that nothing has changed about how we see the year.
Speaker Change: Okay, I understand but I guess, the the 5 million effective reduction for the rest of the year whats, causing that I guess, maybe put it different way.
Speaker Change: That nothing has changed on how we see the year.
Curt R. Hartman: I would now like to turn the conference back to Curt Hartman for his closing remarks, sir.
Speaker Change: Okay two days later.
Speaker Change: Yes.
Speaker Change: Thank you.
Speaker Change: I'd now like to turn the conference back to Curt Hartman for closing remarks, Sir.
Curt R. Hartman: Thank you, Lateef, and I want to thank everybody for their time today, and we look forward to speaking with you on our next earnings call. Thank you, and have a good evening.
Curt R. Hartman: Thank you Latif and I want to thank everybody for their time today and we look forward to speaking with you on our next earnings call. Thank you and have a good evening.
Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.
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